Death of the CFD Dealer
What has happened to the dealing desk?
I started to question what was happening to dealing desks over the last 12 months having watched the growth of off the shelf risk analytics and reporting tech suits for new and existing brokers. It then got me thinking how did we do it 2 decades ago , how did we work it out, what did we do when it was not all handed to us in one box.
Simple answer is we worked it out internally but backed with the direction and knowledge of seasoned professionals. We created our own in house reports and alerts . We collaborated with IT, we project managed. We questioned what we required to be a more efficient desk. We understood the derivatives we were market making. We had a clear understanding of the risk appetite and balance sheet the firm had and then built it. This is what created a dealing team.
When you create something bespoke surrounded by people that are going to use it naturally you will have a better understanding of everything required of the dealing desk, something I believe has and is being lost because of the plug and play style risk suites out there.
A dealer back then wasn’t just taking client bets , they were a broker, a price maker , a liquidity provider, a risk analyst , a market analyst a contact between the trading partners and internal departments.
We had lights we had different sounds for different alerts , it was like Dreamland in Margate on some days but we also understood what the functionality of a desk was , because we created everything for it.
Looking at the status of the job market and what currently seems to be the going rate for a Senior Dealer and Heads of Dealing, all that experience and knowledge seems to have got thrown out the door. How can you pay a senior dealer $45k a year and expect him take any interest in the risk management of the company?
The creation of ready-made risk tech has meant the chap who did ops or looked after the back office has now been promoted to looking after the dealer role as well.
Does that person now know how to broker a client trading $10m-$20m clips of USDJPY during the graveyard shift ( Asian session) ?
Does that person know how to prepare credit lines and financing during a US election , a Brexit, SNB or terrorist attack?
Does that person know how to negotiate terms with external partners?
Does that person understand how to extract the best commercial value from the book?
The computer says no!
I understand that for a vast amount of retail brokers out there it is solely all about sales and I agree it should be, however if that’s the case and to hell with having actual dealers who have some experience in covering the bottom line then it portrays a dismal outlook for a lot of older veterans.
To make it clear I have no issue at all with risk tech, it does a great job in getting new brokers up to a level very quickly, however I would argue that a large proportion of the “dealers” using this tech don’t really understand what they should be doing with it , have no interest in understanding and or would like to use it but senior management really don’t care about Mr Smith having X position in DAX.
I have discussed this topic for years and certainly more frequently and in depth over the first half of the year with ex colleagues and friends in the industry where we explored everything from the obvious tech changes to the assumption people just don’t care anymore.
We have , in my opinion, come to a period where risk and the management of a book whether its trade flow or partnerships , is irrelevant to the many.
Go for broke, run everything and hope for the best I think is predominately how most of the retail brokers work out there (The big chaps obviously removed from this) and has been the case for ages.
To make my point in the deprecation of the senior dealer function I will digress slightly but I am sure many have had the conversation with sales/senior management regarding P&L.
Along the lines:
SM: We made $5m this month
D: No we didn’t we made $2m
SM: Why?
D: Did you factor in sales credits, rebates for affiliates and IBs and profit share agreements?
SM: Eh no but we still made money right.
I would be confident that any senior dealer on $45k is not having this conversation and wouldn’t know where to start.
My point is that if we forget how things were done and opt for a quick and cheap alternative the vast amount of retail brokers will fail and are.
Being part of the old guard I ask myself a question, do senior trading management have one foot in the grave or is there a defibrillator at the end of the tunnel? Only time will tell but if things continue how they are it looks pretty bleak.

















